BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 760 (Wright) - Electrical generation facility: emission
reduction credits.
Amended: April 29, 2013 Policy Vote: EQ 8-1
Urgency: No Mandate: Yes
Hearing Date: May 6, 2013 Consultant: Marie Liu
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: SB 760 would allow the repowering of electrical
generation facility equipment that had been previously retired
permanently in the event of a declared state of emergency. This
bill would also restrict air districts that have programs with
emission reduction credits from requiring changes to existing
equipment in exchange for credits unless those changes are
specified in a protocol approved by the US Environmental
Protection Agency (US EPA).
Fiscal Impact: Unlikely state costs but potentially very
significant local costs, mostly from legal liabilities.
Background: Existing law provides that air pollution control
districts and air quality management districts (districts) have
the primary responsibility for controlling air pollution from
non-mobile sources.
The federal Clean Air Act requires that each state submit to the
US EPA for approval a State Implementation Plan (SIP) that
specifies the manner in which National Ambient Air Quality
Standards for individual pollutants will be achieved and
maintained within each air quality control region in the state.
California has an approved SIP. If a state violates its SIP, the
federal Clean Air Act requires certain sanctions, including a
prohibition on federal funds for transportation projects.
Private parties may also sue an air district for violating an
approved SIP.
Districts in a federal nonattainment area for any national
ambient air quality standard are required to establish by
regulation a system that allows the banking of air containment
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emission reductions in order to offset future emission
increases. The federal Clean Air Act requires that the emission
reductions must be permanent in order to receive an emission
reduction credit (ERCs).
Proposed Law: This bill would allow the repowering of previously
retired electrical generation facility equipment, which had been
permanently shut down in exchange for receiving ERCs, if the
Governor declares a state of emergency due to a sudden and
severe energy shortage and that the shortage can be alleviated
only by the repowering of equipment. If a violation of the
federal Clean Air Act occurs during the repowering of the
equipment, the district may seek civil penalties against the
electrical generation facility.
This bill would also require districts to submit to the US EPA
for approval a protocol specifying the types of changes the
district may require in order to ensure that the emission
reductions used to create ERCs are permanent, including physical
destruction of existing equipment. The district may only require
those changes that are consistent with the approved protocol.
Staff Comments: This bill would restrict an air district from
requiring changes to equipment to demonstrate permanency unless
those changes are part of a protocol approved by the US EPA.
Districts will incur costs to develop these protocols. While
this protocol development would be a mandate, it would not be
reimbursable as air districts have fee authority to recover
these costs.
This protocol development requirement also has the potential to
expose air districts to legal liabilities. The protocol
requirements are a new responsibility for air districts so there
are no existing approved protocols at this time. Furthermore,
the US EPA does not have a process in place to review or approve
such protocols. Until an air district receives an approved
protocol by the US EPA, it is unclear how the air district can
demonstrate that an emission reduction is permanent as a change
can include anything from turning equipment off, to disabling,
to demolition. Thus, should this bill go into effect, districts
will likely be faced with the choice to temporarily halt the ERC
program while a protocol-approval process is developed with the
US EPA - which may be impractical - or continue to run the ERC
program in violation of state law, exposing the districts to
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legal action, most likely from private parties. Staff notes that
a temporary halting of the ERC programs does not appear to be
the intent of the author.
The protocol approval provisions in this bill would apply to any
air district that issues ERCs for electrical generation
facilities. While South Coast Air Quality Management District's
policies seem to be the focus of this bill, many of the other 35
air districts in the state will likely be impacted including San
Joaquin Air Pollution Control District, Bay Area Air Quality
Management District, Sacramento Metro Air Quality Management
District, North Coast Unified Air Quality Management District,
and San Diego County Air Pollution Control District.
This bill would also establish a circumstance where equipment
that was shutdown or retired "permanently" would be allowed to
be repowered under state law. Staff notes that satisfying these
statutory requirements for repowering would not necessarily mean
that the repowering would be acceptable under the federal Clean
Air Act and the state SIP. If fact, if this bill is interpreted
as conflicting with the requirements of the federal Clean Air
Act, this bill would be preempted by the federal Clean Air Act.
Thus, should a repowering occur, despite the statutory authority
granted under this bill, the federal government would have
grounds to assess penalties against the state. Staff believes
that such an action would be highly unlikely. However, based on
past legal actions, staff believes there is a fair likelihood
that the authorizing air district would be sued by private
parties for violating the state SIP. Air districts would incur
legal costs, regardless of the outcome of the case.